General Insurance FAQ
What do the following terms mean?
What’s the point of insurance?
Can you explain about what types of insurance are compulsory?
Are Woman Better Drivers?
Why do premiums rise?
Glossary of common terms;
Asset
An item of economic value owned by you or your company.
Claim
A notification to the insurer that a covered peril has occurred
and compensation for loss or damage is required.
Claims history
Your history of insurance claims.
Excess
The first part of every claim that you have to pay.
Insurer/Insurance Provider
The Company that provides the cover and will pay you for
any claims.
Insurance Broker
An insurance professional able to provide independent
advice on a wide rang of insurance matters.
Liability cover
Can include employers, personal and product liability. Refers
to your legal liability to pay the compensation and costs
awarded against you in respect of loss or damage sustained
by a third party.
Loss Adjuster
An expert in processing claims from start to finish. A loss
adjuster will be appointed by the Insurance company to
negotiate a settlement, within the terms of the policy, which
is fair to both you and the insurance company.
Premium
The amount you pay to receive cover under the terms of
your policy.
Inception Date
The date on a policy for which cover begins. Any claims
made before this date will not be honoured.
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The aim of insurance is to compensate you following a
loss so that you are as well off - but no better off - than
you were before the loss occurred.
An insurance policy is
a contract and your rights as the holder of the policy will
depend entirely on what is written in the contract and on
any endorsements which may be added to it.
Many people
are chronically under-insured. For example, the average
living room alone actually contains around £5,000-worth of
property!
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There are only two types of insurance which are
compulsory: motor insurance and employers' liability
insurance.
Everyone who owns and drives a car on the
public road must, by law, have at least third party insurance
cover. This covers your liability for injuries to other people,
their property, and their cars, caused by the use of your car
while it is on a public road.
In reality most of us opt for "third
party, fire & theft" policies, which cover third party risk, fire
damage and the theft of our car, or "fully comprehensive"
policies which cover accidental damage to our own vehicle
as well.
If you run a business you are legally required to have
insurance to cover you if one of your employees is injured
or ill as a result of working for you.
The law also requires
that you exhibit a certificate of employers' liability insurance
at each place of work. However, if all you are doing is
employing a home help or cleaner you do not need this
kind of insurance. For your peace of mind, it may be worth
checking that your house contents policy covers you for any
kind of accident they may have while working for you.
Public liability insurance is generally voluntary. However some businesses, eg horse riding establishments, are required by law to have public liability cover.
If you run a business that involves the use of certain types of power driven lifting equipment you are required by law to have the equipment inspected at specified intervals.
There are no other legally required insurance policies but
if you have a mortgage your lender will almost certainly
require you to have house buildings insurance to cover your
home and a life insurance policy to cover the mortgage in
the event of your death.
Other Insurance
You should insure your belongings. House contents
insurance for clothes, books, furniture, carpets, etc. The
total contents of the average home are worth around
£25,000! You should remember to make allowance for
'wear and tear' on clothing and household linen.
More and more people are looking to private healthcare
insurance as a way of getting round NHS waiting lists and
you may wish to consider permanent health insurance (PHI)
to cover illness or disability which would prevent you from
working.
If you have a family pet you must decide whether
you can afford vets bills or whether you should insure
against them.
If you are going on holiday - particularly abroad - you should
take out holiday insurance.
Most travel insurance is sold
by travel agents but they may charge between two and
three times as much as other insurers for cover that is often
not as comprehensive.
If you are a frequent international
traveller, making two trips a year or more you will probably
be better off arranging an annual travel insurance contract
rather than cover for each journey.Check the cover, some
annual contracts will not insure you for winter sports.
You should also check to see what cover you have already.
Credit card holders paying for holidays or air tickets with
their plastic, for instance, often get free insurance. Standard
cards' protection may be limited but many gold cards
provide comprehensive travel insurance.
If your household
insurance policy is arranged on an "all-risks" basis, it means
your possessions are also insured outside the home.
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We all know there is a stereotype of women drivers but what is the truth
behind that stereotype?
The answer is that statistically speaking women are better
drivers. The facts come from the collection of claims
data over decades by car insurance companies.
Women,
generally speaking, have the same number of accidents
as men, but it's the seriousness of the accident that is
very different between the sexes.
Typically, an insurance
company has to pay out more to fix a car when a man has
had an accident as the car has to be extensively repaired.
Women's accidents tend to cost less to repair because their
accidents are often the result of minor bumps around town,
or knocks when parking.
Women have a different pattern
of driving to men. They drive shorter distances, have lower
mileage and tend to drive more slowly. Men are convicted
for 92% of driving offences and 98% of all Convictions for
dangerous driving.
Given these ways in which the sexes drive differently and
the actual claims experience of insurance companies, you
can see why an insurance company will decide to generalise
that women drivers are 'safer' drivers.
The difference between the sexes is at its height in the late
teens and twenties. After we turn 30 things tend to even out
and men over 75 are often regarded as the safer risk. Things
could well change though.
A survey by the AA last year showed that 54% of women
admitted to aggressive driving compared to 64% of men.
Also, many women are now driving longer distances and at
higher speeds. But until the statistical evidence shows that
there has been a swing, insurance companies will continue to regard woman as the better drivers.
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For insurance companies 1993 and 1994 were vintage years in terms of underwriting profit. It was the first time since the end of the 1979 that premiums exceeded claims. Every bottom line profit in the intervening years
had been contributed by investment income.
Since 1994,
(the peak of profits for this decade,) every year since has
seen a diminishing return and profits slid with the market
to the bottom of the cycle. In the last 5 years insurance
companies have made losses.
The reasons for a decline since the middle of the last
decade are numerous, but one thing is obvious there are
less players now available to brokers and less insurance
companies vying for those all important market shares.
Competition for market share can be seen as one reason
for the decline in insurance company premiums. The beating
down of prices did no favours to insurance companies nor
did it do anything for consumers, who now feel aggrieved
at the sharp increase in premiums.
If you compare
premiums to the unrealistic lows of the mid-nineties when
each company was trying to outdo the other to gain all
important market share, it is no wonder why consumers
feel disgruntled.
The introduction of Direct writers into the
market have also gone some way in affecting how business
is conducted but ultimately how much it costs.
Some big names have now disappeared from the market,
such as London & Edinburgh. The ultimate example is
Commercial Union merging with General Accident, two of
the larger insurance companies in the UK, to form CGU,
which has now been consumed by the might of Norwich
Union. Lloyds syndicates have also dropped, right now
there are 14 - in two more years this number is likely to
drop to less than 10.
What made all these Motor insurers so
weak that the became take-over targets? The answer, quite
simple, is the amount of money that has been lost over the
last three years. Loss ratios for the last three years equate
to paying £1.22 in claims for every pound taken in premium.
When an industry as big as the insurance industry loses
money on this scale we are talking hundreds of millions of
pounds.
Over the past 12 months there has been a 30% rise in
the average cost of insurance. Newly introduced hospital
charges, the trend of personal injury claims and courtesy
cars have increased the average pay out insurers make for
claims.
In the UK 8% of drivers are uninsured (Germany 1%)
and the cost of the claims they make is still met by insurers.
To exacerbate the situation, tax on insurance has increased
to 5%. Premiums will slowly improve as the industry puts in
measures to cut down the number of uninsured drivers but
for the time being the only way is to keep shopping around
for that deal.
Click here to learn more about about our low cost car insurance.
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